Tether, the largest stablecoin issuer in the world, has announced that it has surpassed the 100% reserve ratio, meaning that it has enough fiat currency and other assets to back up every USDT token in circulation. This is a major milestone for the company, which has faced scrutiny and criticism from regulators, investors, and the crypto community over its transparency and solvency. Tether USDT is one of the most popular and controversial stablecoins in the cryptocurrency market.
Tether USDT claims to be backed by US dollars at a 1:1 ratio, meaning that for every USDT in circulation, there is a corresponding US dollar in reserve. However, this claim has been challenged by many critics and regulators, who doubt the veracity and transparency of Tether’s reserves and audits.
Tether USDT was launched in 2014 by Tether Limited, a company based in Hong Kong and registered in the British Virgin Islands. Tether Limited is affiliated with Bitfinex, one of the largest and oldest crypto exchanges in the world. Tether USDT is issued on various blockchain platforms, such as Bitcoin (via Omni Layer), Ethereum, Tron, EOS, Algorand, Solana, and others.
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Stablecoins are cryptocurrencies that are pegged to a fiat currency or a basket of assets, such as the US dollar or gold. They are designed to provide stability and liquidity in the volatile crypto market, as well as to enable cross-border payments and remittances. Tether is the most popular and widely used stablecoin, with a market capitalization of over $70 billion as of August 2023.
However, Tether has also been accused of manipulating the crypto market, inflating its supply without proper backing, and being involved in illicit activities. In February 2021, Tether and its sister company Bitfinex settled a lawsuit with the New York Attorney General’s office for $18.5 million, without admitting or denying any wrongdoing. The settlement required Tether to submit quarterly reports on its reserves and to stop serving customers in New York.
Since then, Tether has made efforts to improve its transparency and compliance, hiring independent auditors, publishing attestations, and diversifying its reserve assets. According to its latest report, as of June 30, 2023, Tether had $71.2 billion in total assets, of which 75.85% were cash and cash equivalents, 12.55% were secured loans, 9.96% were corporate bonds and precious metals, and 1.64% were other investments. The report also stated that Tether had $70.9 billion in liabilities, of which $70 billion were USDT tokens and $900 million were other payables.
This means that Tether had a reserve ratio of 100.42%, exceeding the 100% threshold for the first time since its inception in 2014. Tether’s CEO Paolo Ardoino said that this achievement was a result of the company’s commitment to transparency and accountability, as well as the growing demand and adoption of USDT in the crypto ecosystem.
We are proud to announce that we have surpassed the 100% reserve ratio, which is a testament to our resilience and reliability as the leading stablecoin issuer. We have always honored our promise to redeem every USDT token at par with the US dollar, and we will continue to do so. We thank our customers, partners, and regulators for their trust and support, Ardoino said in a press release.
According to Tether’s website, each USDT is backed by a reserve of traditional currency held in Tether’s bank accounts. Tether claims that its reserves are regularly audited by independent third parties, and that it publishes monthly reports on its website showing its assets and liabilities. Tether also states that it follows strict anti-money laundering (AML) and know-your-customer (KYC) policies, and that it complies with all relevant laws and regulations.
However, these claims have been met with skepticism and scrutiny by many observers, who question the validity and reliability of Tether’s backing and reporting. Some of the main issues raised by Tether’s critics are:
Lack of transparency: Tether has not provided a full audit of its reserves by a reputable accounting firm, nor has it disclosed the identity and location of its banking partners. The monthly reports published by Tether are not verified by any external auditor, and only show aggregate numbers without any breakdown or detail. Moreover, Tether has changed its reserve policy several times over the years, from claiming to hold 100% USD reserves, to admitting to holding other assets such as loans and securities, to stating that its reserves include “cash equivalents” and “other receivables”.
Legal troubles: Tether has faced multiple lawsuits and investigations from various authorities around the world, including the US Department of Justice (DOJ), the New York Attorney General (NYAG), the Commodity Futures Trading Commission (CFTC), and others. Some of these cases are still ongoing or unresolved, while others have resulted in settlements or fines for Tether. For example, in February 2021, Tether agreed to pay $18.5 million to settle a case with the NYAG, which accused Tether of misleading investors and customers about its reserves and liquidity. As part of the settlement, Tether also agreed to provide quarterly reports on its reserves to the NYAG for two years.
Market manipulation: Tether has been accused of inflating the supply and demand of USDT to manipulate the price of Bitcoin and other cryptocurrencies. Some studies have suggested that there is a positive correlation between USDT issuance and Bitcoin price movements, implying that Tether prints new USDT tokens without sufficient backing and uses them to buy Bitcoin on exchanges, creating artificial demand and driving up the price. Some critics have also alleged that Tether is involved in wash trading, spoofing, pump-and-dump schemes, and other fraudulent activities to manipulate the crypto market.
Tether’s announcement was met with mixed reactions from the crypto community. Some praised Tether for achieving this milestone and proving its critics wrong, while others remained skeptical and questioned the validity and quality of its reserve assets. Some also pointed out that Tether still faced legal challenges and regulatory uncertainties in other jurisdictions, such as Europe and Asia. Regardless of the opinions, Tether’s surpassing of the 100% reserve ratio is a significant event for the stablecoin industry and the crypto market as a whole. It shows that stablecoins can be viable and trustworthy alternatives to fiat currencies, as well as catalysts for innovation and inclusion in the digital economy.